Taiwan trading volume hits nearly 3-year high

TAIPEI, Taiwan -- Boosted by a move by the local government to relax day trading rules, the trading volume of Taiwan's share market on Thursday posted a record of NT$134.15 billion, the highest since March 17, 2011.

Turnover of Taiwan's over-the-counter market also set a 22-month high, coming to NT$35.376 billion.

Concurrently, Taiwan's top financial regulator yesterday revealed that it is evaluating further relaxation of day trading, which includes lifting a ban on selling short then buying — a technique of day trading — and stocks eligible for day trading expanded to 1,200 tranches. Assessment results are set to be published in three months.

Financial Supervisory Commission (FSC) Chairman Tseng Ming-chung (曾銘宗) yesterday told The China Post that the move by the government to relax day trading rules has successfully lured investors back to the trading floor.

As part of the efforts to revitalize Taiwan's share market, the FSC is now allowing day trading of select large- and mid-cap stocks. Day trading refers to a short-term trading method by which investors buy then sell or sell short then buy the same security on the same day.

Tseng yesterday told a media briefing that the FSC is keeping close tabs on the the operation of relaxed day trading and its impact on Taiwan's share market, adding that conclusion won't be made until three months' time.

By then, the FSC will determine whether to allow investors to adopt selling short then buying operations.

Daily Limit of Stock to be Liberalization Stumbling Block

The selling short then buying trading method happens when pessimistic investors borrow desired units of certain stocks so as to sell and buy back later in the day when the share price drops. This method usually adds downward pressure to the broader market, the last thing the FSC said it wants to see at the moment.

The commission now only allows buying then selling day trading, a method by which optimistic investors use borrowed funds to place buy-in orders on certain stock and sell at a higher price on the same day.

Tseng also told The China Post that the commission is thinking about broader application to an eventual 1,200 stocks eligible for day trading. Currently, a total of 200 stocks on the Taiwan Stock Exchange and the over-the-counter market fall under the new day trading rules.

The FSC said a final assessment report will be published for the commission's reference. According to United Evening News, after the entire ban on day trading is lifted for Taiwan's share market, the daily maximum/minimum of 7 percent for a stock's positive or negative movement will remain the only obstacle in the way of complete liberalization of Taiwan's share market.